GOLD PRICE, CHARTS AND ANALYSIS:
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Gold (XAU/USD) AND DOLLAR INDEX FUNDAMENTAL BACKDROP
The Gold price rallied higher in Asian trade with a retest of the $2000 which remains a magnet for price of late. The European session has seen some bids for the dollar index (DXY) materialize, helping gold retreat toward the $1985 mark at the time of writing. Gold has been trading similar to US stocks of late with little to committal in either direction. Acceptance above the $2000 handle for any sustained period remains elusive for the precious metal as the question around a new all-time-high lingers on.
US dollar weakness to start the week has aided the precious metals rise back toward the $2000 mark. Not all that surprising as Futures indicate that investors have reduced their bets on the Federal Reserve’s hiking cycle, with the markets now predicting a peak benchmark rate will be reached in June. Futures also indicate a terminal rate of 4.5% by the end of 2023 with rate cuts expected in the second half of the year. The CME Group FedWatch Tool (Chart Below) seems to agree, with the probability of a terminal rate of 4.5% in December 2023 resting at 34.1% while a 4.75% rate rests at 36.1%, both hinting at rate cuts before the end of the year. Next weeks Fed meeting sees markets expecting the US Central Bank to raise rates by 25bps with softer PCE data on Friday unlikely to sway the Fed.
Source: CME FedWatch Tool
The recent struggles by the Dollar Index (DXY) does provide optimism for Gold bulls eyeing a sustained break above the $2000 mark and potentially the all-time highs. Comments from Federal Reserve policymakers won’t be forthcoming this week either as the Fed have entered their ‘blackout’ period ahead of the May 3 FOMC meeting. This could leave the Dollar Index staring down a barrel if US data comes in soft this week, in particular Fridays Core PCE print. The US economic docket for the day brings us CB Consumer Confidence data which I don’t expect to have any material impact on price movements.
For all market-moving economic releases and events, see the DailyFX Calendar
The earnings releases for Alphabet and Microsoft are both due after market close today while we also have Pepsi, General Motors, McDonalds and a host of other earnings releases as well. The impact is more likely to be felt in tomorrow’s Asian session and beyond. The earnings picture is likely to play a bigger role in price movements for Gold as positive results is likely to increase risk appetite for stocks and could see Gold experience outflows as a result.
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
Form a technical perspective, Gold is trading in an ascending channel but has been printing lower highs and lower lows on the H4 timeframe. Furthermore, the H4 timeframe is setting up a death cross as the 50-day MA looks to cross below the 100-day MA, hinting at downside momentum. This ties in with today’s price action on the daily timeframe thus far as we have rejected the $2000 handle and could close as a shooting star candlestick.
Ahead of the earnings releases and this week’s Core PCE data a short-term approach appears more reasonable with intraday resistance resting around the $2002.20, $2010 and $2032 handles respectively. Alternatively, a rejection and move lower could bring support at $1982 and yesterday’s low around $1974 into play before focus turns to the monthly low around $1950/oz.
No clear direction for the precious metal as you can surmise from the technical outlook with a slight bias toward the downside. The overall market sentiment continues to be a key driver for gold prices and that looks set to continue as we await a busy week to finally get under way.
Gold (XAU/USD) Daily Chart – April 25, 2023
Source: TradingView, Chart Prepared by Zain Vawda
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda